Wednesday, August 26, 2009

Jindal Cotex Limited IPO - Should You Subscribe?

Open Date: 27 Aug 2009Close Date: 01 Sep 2009BackgroundJindal Cotex Limited (JCL) offers 12,453,894 (about 12 million) Shares Face Value Rs. 10/- each, representing 49.81% of post issue equity. The present issue is being made to raise the funds for setting up a new facility for manufacturing of Cotton Yarn, Yarn Dyeing and Garments and to invest in Subsidiaries Jindal Medicot Limited and Jindal Specialty Textiles Limited. The company has not contemplated to use the proceeds to repay the bank loans.

Issue Open: August 27, 2009.

Issue close: September 01, 2009.

Public Issue Type: 100% Book Built Issue.

Public Issue Size: 1,24,53,894 Equity Shares of Rs. 10/-

Public Issue Price: Rs 70/- to Rs 75/-

Company profileJindal Cotex Limited (JCL) based in Ludhiana, Punjab, incorporated in 1998 has been promoted by Mr. Sandeep Jindal, Yash Paul Jindal, Rajinder Jindal and Ramesh Jindal. JCL is an ISO 9001:2000 certified company engaged in the business of manufacturing of Acrylic, Polyester, and Polyester-Viscose, Polyester Cotton, combed and carded yarns used in apparels, suitings & knitted fabrics. It has an installed capacity of 23,472 spindles for acrylic, cotton blended and polyester yarns with a manufacturing capacity of 6500 TPA. JCL manufactures and sells yarns under the trade name ‘JINDAL’. In addition, the company has installed and commissioned Wind Electric Generator (Wind Mill) of 1250KW capacity at Pithla-Satta-Gorera in the state of Rajasthan.

Should you subscribe ti Jindal cotex IPO?One of the reknowned investment advisor said that one should remain away from the issue. "One must admire the courage of the promoters to come out with an IPO in the band of Rs 70 to Rs 75, against the book value per share of Rs 23.10, as on 30-06-09 and at a PE multiple of 21.68 times, at the upper end of the price band. There are over 10 similar companies available at PBV of 0.50 times and at a PE of close to 5 times", he said.

Such companies come out with IPO mainly to play in the stock market, as it is obvious that no sane investor would be willing to subscribe to it, when so many lucrative ideas are available in the secondary market. A clear advice to the public – remain away from the issue and don’t be part of this weak and unviable project.

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